BAGHDAD - Iraqi forces clashed with an Iranian opposition group for a second day Wednesday after storming a camp north of Baghdad despite U.S. appeals not to use force against exiles protected for years by American troops.

BAGHDAD - Iraqi forces clashed with an Iranian opposition group for a second day Wednesday after storming a camp north of Baghdad despite U.S. appeals not to use force against exiles protected for years by American troops.

Tehran cheered the operation, raising worrying questions about how Iraq can balance relations with its two closest allies, Iran and the U.S.

The People's Mujahedeen Organization of Iran claimed seven people had been killed and scores wounded, saying the standoff continued at the camp north of Baghdad on Wednesday. A police officer at the scene, speaking on condition of anonymity because he wasn't authorized to release the information, confirmed the casualties.

Some Iraqi government officials denied any deaths in the operation at Camp Ashraf and the casualty reports could not be independently verified. The camp is located at an arid area in the turbulent Diyala province and Iraqi authorities prevented reporters from reaching the facility.

The United States, which considers the group a terrorist organization but has insisted the camp's residents be treated humanely, urged restraint on both sides.

About 3,500 ex-Iranian fighters and relatives live in the camp, set up in 1986 when they helped Saddam Hussein in the Iraq-Iran war. After the U.S. invasion of Iraq in 2003, American troops disarmed the fighters and confined them to the compound.

The Americans handed over responsibility for the camp to the Iraqis on Feb. 20 to comply with a security pact that took effect this year but said they would maintain a force nearby to ensure humane treatment of the Iranians. Tensions rose as the Iraqi government stepped up efforts to get rid of the group, raising concern about the future of the camp residents.

U.S. officials said they did not get advance warning about the raid, which coincided with a visit to Iraq by Defence Secretary Robert Gates.

"We are very clear that we expect that the government of Iraq, now that it has assumed the security responsibility, will fulfil its obligations to show restraint, will not forcibly transfer anyone to a country where such a transfer might result in the mistreatment or the death of that person based on their political affiliation and activities," Secretary of State Hillary Rodham Clinton said in Washington.

Iran, meanwhile, thanked the Iraqi government for moving into the camp.

"Yesterday, we heard of the Iraqi government raid on Camp Ashraf," said parliament speaker Ali Larijani. "This is appreciated, that the Iraqi government decided to clean Iraq from the dirty presence of terrorists. However, it was a late move," he told the Iranian legislature Wednesday.

The responses - by the U.S. and the Iranians - reflected the conflicting interests of the two rival nations in Iraq, which has close relations with fellow majority Shiite and neighbour Iran and is at present reshaping its relationship with the United States as Washington prepares to withdraw its forces by the end of 2011.

The People's Mujahedeen, which has in the past given the Americans intelligence on Iran, appealed to President Barack Obama to intervene, citing a 2003 agreement with the Americans under which the camp's residents gave up their weapons in exchange for protection.

Maryam Rajavi, the president-elect of the National Council of Resistance of Iran - an umbrella group that includes the People's Mujahedeen - claimed Iraqi forces had blown up the camp's water purifying system. Her aides said the fifth victim of Tuesday's violence died overnight, and two more were killed Wednesday.

"The Americans must take responsibility for the safety of Ashraf's residents," Rajavi told a joint news conference in Rome with several Italian lawmakers. Many of the residents have dual nationalities with Western countries.

Rajavi charged Iraq's government was acting as a proxy for the Iranian regime and said her group would present a complaint against Iraqi Prime Minister Nouri al-Maliki to international courts.

Iraq, however, maintained it had the right to assume control of the camp as part of measures to establish security and blamed the residents for the clashes, saying they were defying efforts to impose the law.

"The Iraqi government intends to assert its sovereignty on all sites and facilities that were controlled by foreign troops and Camp Ashraf is not an exception to this," government spokesman Ali al-Dabbagh told AP Television News. "The Iraqi government is dealing with members of this camp in a humane way."

"The Iraqi government doesn't intend to clash with members of this camp, but it will enforce the law decisively," he added.

Abdul-Nasir Billah, the governor of Diyala province, denied any deaths occurred. In a bid to gain sympathy, he said, residents pelted the Iraqi security forces with rocks to provoke them.

The Iraqis had maintained a security cordon around the camp's perimeter but a day before the Tuesday raid, they said they would assume complete control and promised to protect the people inside.

The announcement raised fears the Iraqis would forcibly evict the exiles, and the group's leaders announced shortly afterward that they were willing to return to Iran if they were guaranteed immunity from prosecution and obtained guarantees in writing from Iran, the United States, the United Nations and Iraq.

Members of the Iranian group claimed that American soldiers observed the clashes but did not intervene.

"I know of no advice or assistance that was requested of U.S. forces," Army Lt. Gen. Charles Jacoby told reporters Wednesday at the U.S. military headquarters on the western outskirts of Baghdad.

Jacoby stopped short of saying no U.S. soldiers were present, saying only that there was a small base in the vicinity of the camp and that soldiers there "are always observing and taking a look at what's going on."

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Associated Press Writers Ariel David in Rome and AP employees in Diyala province contributed to this report.